Over-55 housing market continues to gain steam

These days, the suburban new-home market is a mixed bag at best, with median prices increasing on lower sales volume in most areas.

Builders are using incentives to push product. And, to lower inventory, they have reduced the number of houses built "on spec," or without a contract from a buyer.

Yet the active-adult segment is not suffering as much as the new-home market as a whole, says Gopal Ahluwalia, vice president of research at the National Association of Home Builders.

"The current factors, especially high prices, have been affecting the first-time buyers more than anyone else, and it has gotten more difficult for them to buy because the problems with subprime loans have made lenders tighten credit standards," Ahluwalia said.

The over-55 market is not feeling the same pressures because so-called active adults are not in a "supply market" -- that is, in most cases they are not in a hurry to buy a house.

"When these buyers get into the market, they come in with higher income, deeper equity, and already are living in a house that has gone up in value over the years," he said.

Credit-tightening has hit the existing-home market hardest, since the majority of first-time buyers -- at least in older areas of the country such as Midwest -- purchase those homes, according to the National Association of Realtors.

Slower sales were anticipated because of tighter lending standards and because many subprime loan products have been pulled, the Realtors association reported. But a recent Credit Suisse survey found the same situation occurring in the new-home market.

Though sales of active-adult housing were off in the first quarter of 2007 compared with the same periods in 2006 and 2005, builders continue to plan new communities.

"There are a lot more builders in the market these days than ever before, so that means more competition for us," said Peggy Varani, vice president of new homes and estates for Coldwell Banker Preferred, who represents Philomeno & Salamone Builders.

The builder has just launched a new active-adult community, Sherwood Reserve in Plymouth Meeting, Pa., which is offering homes from 1,800 to 2,300 square feet and priced from $419,000 to $479,000, and has successfully marketed another 55-plus community.

"The 55-plus market has been good to us and to a couple of other builders in the market," Varani said. "In addition, it is much easier building active adult than other kinds of housing because the buyers pay taxes but don't add children to the school system."

Are these builders taking a risk? Few experts think so.

According to MetLife's Mature Market Research, about one-quarter of the population of the United States, or roughly 80 million people, is age 50 and above.

So "demographics show that there will be a continuing demand for the active-adult market," said Diane Williams, an agent with Weichert Realtors in Spring House, Pa.

Timing is an issue, however. Surveys show that over-55 buyers tend to take their time.

"Many people over 55 are just not ready for the active-adult communities. They prefer a carriage-type community where it is a 'turn key' -- no maintenance, with all lawn care and snow removal done," Williams said.

In addition, many 55-plus buyers are truly downsizing. Ahluwalia said the average square footage of new homes generally has hovered at 2,400 after climbing for more than two decades.

Still, builders and experts alike see a danger in assuming too much about active-adult buyers -- including that they have deeper pockets than anyone else, said Frank McKee, president of the McKee Group.

"It's more of a broader-based profile than it was 20 years ago," said McKee, who has four active-adult communities under way. "Twenty years ago, move-up buyers tended to pay cash or go with 'light financing.' Today, most are willing to take on a mortgage and not spend their equity."

Plus, what active-adult buyers want in a house continues to change by the minute.

A March survey of 600 people over age 50 who had purchased a new home within the last four years -- conducted by Zanthus, a consumer technology market research firm, for the Internet Home Alliance Research Council -- showed that they were are looking forward to an active and healthy retirement.

Council vice president Tim Woods said the choices the respondents made about their homes' location, design and upgrades "reflect that optimism."

"Few said they were moving into a new house as a result of a health condition, children moving out, or some other family-related reason," he said.

Fifty-nine percent said they settled on an active-adult community because of a desire to "live near people with similar interests who were similar to them in age and stage of life," he said.

The top reason for moving into a new home, cited by 49 percent of the respondents, was a desire "to have a home with a better layout," Woods said.